Free car gambit to lure depositors

A Spanish bank is offering its customers cars free of charge in exchange for opening long-term, interest-free deposits.

Banesto, a mid-sized lender controlled by Santander, Spain's largest bank, is offering savers Citroen cars or Piaggio motor scooters in lieu of interest payments under a promotion called Sobre Ruedas, which translates as "smooth running".

Banks routinely offer customers opening new deposits small gifts like pens, although Banesto has in the past given clients computers and flat-screen televisions. The latest offer, however, marks the bank's biggest product giveaway to date.

Banesto does not pay interest on depositors' capital during the lock-in period of the offer, but is offering to take care of details such as registration and transport to the nearest dealership. Those customers who do take it up pay tax as if the vehicle's value were interest.

The gambit highlights the tough times both banks and the car industry are facing in Spain as the country weathers a sharp economic downturn.

Spanish lenders have been particularly hard hit by the seizing up of wholesale funding markets, which many had grown dependent on to finance their ballooning mortgage portfolios. The credit squeeze has exacerbated a downturn in the housing market, which is virtually at a standstill.

New car registrations in Spain fell by 41.3 per cent year on year in August, the steepest collapse for any European Union country save Ireland.

Banesto's offer began on September 16 and runs until the end of this year.

To qualify for the vehicle offer, savers must commit between €18,000 ($26,382) and €160,000 locked in for a period of between 24 and 36 months.

The top car on offer is a diesel version of the Citroen C4 family car for depositing at least €160,000 over three years, but the bank is also offering the smaller C2 and C3 models.

"The larger the deposit and the longer you leave it, the bigger the prize," a UK-based spokesman for PSA Peugeot Citroen said yesterday.

Banesto has long prided itself on innovation in marketing.

In March last year, it opened 170 branches at midnight as part of a promotion involving the sale of Sony's PlayStation 3 at a cut-rate price of €350. New clients had to commit to a two-year account contract with the bank to qualify.

One of the first offers to the new recruits was an interest-free loan to pay for the console.

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